ETHOS

By Chloe Wayne

I’m a business economics student, and at some point, I came to view the standard pedagogy of economics as somewhat disconcerting—why, I have wondered, do our professors spend so much time explaining outcomes under “ideal” market conditions that never actually occur in the real world? Why are we so hesitant to fully scrutinize so many signs that these hypothetical models are materially different from the real-world market structures in which we daily operate?

Perfect competition & Pareto optimality: This rarely ACTUALLY exists in real life. So why are we taught otherwise?

Neoliberal economics preaches the sanctity of free markets, and operates on the assumption that everyone competes on equal footing, and that markets function efficiently and fairly when left to their own devices. We are obsessed with the divine gift of capitalism—a forever-burgeoning “middle class” with bourgeois sensibilities—thus, it is no accident that standard economics ignores the fates of the marginalized, and instead focuses on the “average” individual.

Maybe I’ll call the author of my textbooks and let them know that we are not all educated white males; ergo, shit isn’t as simple as they make it seem.

Few trouble the problematic effects of molding each new generation to view benefit in terms of capital. With growth or gain in mind, we neglect to include other seemingly unrelated factors—is there no utility in helping the poor and bridging the income gap? Nothing to gain from fighting against racial and gender inequities that limit socioeconomic and other opportunities? With the exception of one class on corporate ethics, my classmates & I are taught to make decisions with the bottom line in mind.

Though this generally makes sense in a business setting, there is a dangerous spillover effect. My friend once lamented the absurdity of a conversation about Hurricane Katrina that went on in his business & social policy course. When the professor asked the students whether they, as managers of a corporation, would have stepped in with donations or aid in the immediate aftermath, several students answered simply: No—it would not have been profitable. (If your jaw just dropped, that’s the correct reaction).

How can the word “profit” come to mind upon seeing this photo?

Needless to say, my friend dropped the course quickly thereafter—he could not bear to hear questions of basic human compassion and social health be hijacked by “business” interests.

Average income (GDP per capita), we are taught, is the best metric for aggregate well-being: if the average person is doing well, we believe we as a society are doing well. In class and in texts, we acknowledge income inequality, and then move on; “c’est la vie,” we tell ourselves, “we must maximize the general welfare at the expense of certain individuals, we must act in self-interest to benefit the greatest good, such is the reality of capitalism.”

However, the recent subprime mortgage crisis and its devastating effects on urban poor and middle-class Americans have led many to question this mentality. Thus, despite all the havoc wreaked, there perhaps exists a kernel of fortune: the emergence of dialogue that questions the “value” of market fundamentalism in the absence of morals or basic concern for others’ well-being.

Case in point: The Wall Street Journal Economics Blog recently published an entry about the Economic Opportunity Index, the brainchild of a nonpartisan non-profit called Hope Street Group (whose policy director is a senior economist at Goldman Sachs—interesting). According to their Mission, they seek to expand opportunity in an “Opportunity Economy” in which “all people have fair access to markets for jobs, homes, and capital…[and] all children have educational opportunities that allow them to fully realize their potential.”

Unlike many economic models, this one is not based on the myth of the infallible free market. Further, it implicitly recognizes that real-world markets are anything but perfect, and that we must account for the intersectionality of economic opportunity and race (among other things) if we have any hope of conducting meaningful analysis. The index measures expected lifetime income using determinants such as human capital (i.e. local incarceration rates, education levels), labor market dynamism, and the social safety net. The EOI “is different from existing economic indicators because it doesn’t look at the economic outcomes, but rather the potential” (WSJ, 4/15/08)

Hope Street writes: “Economic opportunity, the foundation of our nation’s identity and prosperity, varies considerably cross different groups of Americans as the legacy of economic and racial divisions leaves many with only limited access to education, health care, jobs, or capital…The Index will bring hard facts and solid, nonpartisan analysis to what is now a confused and polarized debate over whether we should “grow the pie” or “redistribute the pie.””

Wow…a forward-thinking algorithm for an economics that nakedly acknowledges the impact of racial and educational inequity on socioeconomic stratification! A methodologically sound measure for the effect of structural barriers on economic outcomes!

I can only hope that people are paying attention.